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Hitting the highs and lows

With the pharmaceutical sector performing in line with rising markets, a tough sales environment has taken its toll on some niche players

A skateboarderFTSE 100 Index, fuelled by continued news of bids, both actual and rumoured. It was also given an additional fillip as hurricane Rita, the latest storm to hit Louisiana and Texas, skirted around the oil producing areas causing the price of oil to drop back.

While the pharma sector is performing in line with the market, pharmaceutical and biotech companies have been the subject of many a rumoured merger or acquisition. Sir Tom McKillop, the outgoing chief executive of AstraZeneca, is reported as pouring cold water over any future merger for the Anglo-Swedish firm. He argues that growth will come for AZ from making inroads into new markets and by marketing existing products successfully.

UK biotechnology company Biofocus is selling out to Galapagos Genomics, a Dutch company, which is offering 124p per share. The offer represents a huge 121 per cent premium on the market share price, which zoomed ahead from 56p to 102.5p on the news. The bid is being financed via Galapagos Genomics shares and Biofocus shareholders stand to get 30 per cent of Galapagos.

Silver lining

Antisoma, the cancer drug developer, posted a loss of £9.61m for the year ended June 2005 as against a loss of £1.79m in 2004. Sales were down 65 per cent at £6.27m from £18.1m in 2004. The flow of revenue has fallen and losses rose steeply as payments from Roche on the licensing front dwindled. However, the good news is that Antisoma has a cash pile of £25m which, at its present rate of cash burn, is enough to last it until 2007.

The rate of trial data coming from Antisoma is due to speed up with AS1404 entering phase II trials. AS1404 attacks the blood vessels of tumours occurring in non-small-cell lung cancer, ovarian cancer and prostate cancer. Results from the lung cancer trial are expected before the end of December 2005.

Antisoma also has a licensing deal with its partner Roche for R1550, a treatment for secondary breast cancer tumours, which is in phase I trials with data expected to be announced early in 2006.

Market analysts are hoping that Antisoma may sell the rights to one or more of its pre-clinical drugs to Roche to boost revenue.

The share price of Allergy Therapeutics fell back as it announced a pre-tax loss of £1.93m on sales of £20.6m for the year ended June 2005 against pre-tax profits of £1.59m on turnover of £18m in the previous year. Allergy Therapeutics makes a hayfever vaccine Pollinex Quattro in Europe on a 'named patient basis'.

The global allergy market is large but little catered for. Vaccines to treat hayfever, for example, are usually made up by doctors and injected into patients around 20 times in the course of a treatment. Pollinex Quattro improves on this as the treatment is delivered in just four injections.

Allergy has signed an £8m Canadian licensing deal with Allerpharma and is seeking formal approval for Pollinex Quattro in Europe and the US. Allergy Therapeutics is planning to develop grass and tree allergy products in 2006/7.

On the up

Biocompatibles, the medical devices specialist, reduced its pre-tax loss from £2.46m in 2004, on sales of £1.41m, to a pre-tax loss of £1.31m, on sales of £1.46m in the year to end June 2005. Group operating losses rose from £3.4m to £4.6m as the development programme gains momentum.

The shares have been on a roll which should continue - partly because Biocompatibles is paying out 29 pence per share to shareholders in a return of capital. The money had been accumulated in a special fund to meet any liabilities from a court case between Abbott Laboratories and Biocompatibles, following Abbott's purchase, of Biocompatibles stent business in 2002. The court action has been settled, hence the return of cash to shareholders.

Sales of Biocompatibles' beads for the embolisation of uterine fibroids rose from £500,000 to £800,000. The company also has a drug-eluting bead in the pipeline for the treatment of primary liver cancer. Data from the trials of the latter is due to be presented next month to the prestigious American Association for the Study of Liver Diseases.

Isotron, which sterilises medical products, has seen a strong rise in its share price over the last six months, and full-year results to end June 2005 justified the rise. Pre-tax profits rose 18 per cent to £9.32m and turnover rose 10 per cent to £39.6m.

Isotron is growing organically and via astute acquisitions. It recently bought EBIS, which brought with it three processing lines to add to overall capacity.

The company is boosting its operation in Thailand by building a second gamma plant, which is scheduled to begin operations in 2007. Isotron's main medical division is delivering a solid performance. Broker Brewin Dolphin expects pre-tax and pre exceptional profits for 2006 to rise to £11m.

Ardana, the pharmaceutical company, saw a useful rise in its share price as the US Food and Drugs Administration gave it the green light for its development plan for Teverelix, its cancer drug.

Malcolm Craig, the author of 14 books on different aspects of successful investment, is one the country's most respected investment commentators.

2nd September 2008

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